Financial Discount Rates in Project Appraisal (Suat Chiet Khau Tai Chinh Trong Tham Dinh Du an) (Vietnamese Version)

Abstract

In the financial appraisal of a project, the cashflow statements are constructed from two points of view: The Total Investment (TI) Point of View and Equity Point of View. One of the most important issues is the estimation of the correct financial discount rates for the two points of view. In the presence of taxes, the benefit of the tax shield from the interest deduction may be excluded or included in the free cashflow (FCF) of the project. Depending on whether the tax shield is included or excluded, the formulas for the weighted average cost of capital (WACC) will be different. In this paper, using some basic ideas of valuation from corporate finance, the estimation of financial discount rates for cashflow in perpetuity and single-period cashflows will be illustrated with simple numerical examples.

Note: Downloadable document is in Vietnamese. The English version is available to download at: http://ssrn.com/abstract=204010

Keywords: cost-benefit analysis, capital budgeting, project evaluation

JEL Classification: D61, G31, H43, M40, M46